Monthly Archives: May 2008

While Germany is taking all its nuclear power plants offline, the EU’s climate policy is aimed at a mix of nuclear and renewable energy sources

Germany has committed itself to phasing out nuclear power by 2022 and to replace the capacities with modern technology for fossil fuels like more efficient coal-burning power plants and renewables. In contradiction to Germany, most European countries and the EU Commission are considering nuclear power as substantial for the European climate and energy policy as nuclear energy is helpful to reduce CO2 emissions and reduces the dependence on fossil fuel imports. Countries like France and Finland are building new nuclear power plants; Italy which had shut down all its nuclear power plants after the Chernobyl accident is now considering the revival of nuclear power generation. Rising electricity prices and an enormous dependence on gas imports prompted this U-turn. 10% of Italy’s electricity is nuclear power which is imported. And luckily, the phaseout in Germany is under pressure now as electricity suppliers warn of blackouts, shortages and higher prices. And they’re at least partly right. The plan of the former government , on which the current government can’t agree to change it, to build numerous coal-burning power plants has come to a halt as there is heavy resistance against new power plants and especially against CO2 emitting coal-fired ones. Renewable energy has gained a considerable share of the German electricity supply, but they’re driving up prices as they’re subsidized by a surcharge on the electricity bill and even the extension of solar, wind and geothermal energy has slowed down as there are not many places remaining where e.g. a wind turbine could be set up and work efficiently. If the transition from nuclear energy is not halted, electricity prices will keep rising in Germany and it’ll be impossible to meet the CO2 reduction targets. The costs of production of nuclear power remain relatively stable whereas generating energy out of fossil fuels is becoming more and more expensive which might also be accelerated by the planned European emissions trading system.

Another critical issue is that there is little acceptance for nuclear energy in the population. But these people don’t consider that taking domestic power plants offline and eventually having to import (nuclear) power from neighboring countries does more harm than good. Countries in Eastern Europe are interested in further nuclear power plants and are already generating nuclear power. However, the old power plants in Eastern Europe are often less safe than the more modern ones which might face phasing out. The security of energy supplies is apparently no issue most Europeans worry about when protesting against nuclear power. But skyrocketing energy prices and expected power shortages are likely to change their minds. Hopefully, Germany’s next government realizes that nuclear energy is a powerful option for providing safe and affordable energy without emitting greenhouse gases.

Altogether, a broad palette of renewable, nuclear and fossil energies is the best mixture for a time in which the entire energy sector is in transition.,2144,3351691,00.html



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Air Berlin reconsidering long-haul destinations – does low-cost not work for longer destinations?

Air Berlin is the second largest German airline after Lufthansa and operates semi low-cost flights mainly in Europe, and to some destinations in China and North America since last month. The acquisitions of German competitors and a long-haul operator of tourist destinations are part of the airline’s strategy of expanding its operations from holiday and business destinations throughout Europe to long-haul destinations in China, North America and – operated by its subsidiary LTU – in Thailand, the Maledives, Sri Lanka and the Caribbean.

Yet, as airlines around the world struggle with high fuel costs, environmental criticism and passengers unwilling to spend more on tickets, Air Berlin also suffers. Even the important business travelers cut on their travel spending and seat occupancy in first and business class has slumped.

Air Berlin launched its 5 times a week services from Germany to Shanghai and Beijing in China last month, but now they’re cutting 2 weekly flights to Shanghai and are reconsidering all long-haul destinations as well as unprofitable destinations in Europe.  The intercontinental flights consume most fuel and Air Berlin faces a fierce competition with the established airlines, particularly Lufthansa. It is obvious that Air Berlin has chosen the wrong point in time to launch an intercontinental service. OASIS Hongkonk airlines, the first intercontinental low-cost carrier, also failed and had to cease its operations in spring.

Despite increased revenues and a higher seat occupancy, Air Berlin had to announce the second profit warning this year which puts pressure on the executives to review its current strategy. One measure to reduce costs is the instruction to Air Berlin’s pilots to slow down a bit to save fuel. Whether the airline cancels some of the numerous firm orders which include 25 Boeing 787s and 34 A320 remains to be seen. The market value of the airline is down by 41% since the beginning of this year. This could make Air Berlin a take over candidate though Air Berlin itself still plans to take over yet another tourist airline.

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Ties between China and Taiwan are warming

China and Taiwan are holding talks again about opening regular direct flights between mainland China and Taiwan. This is a major step out of the frosty relationship which derives from the Chinese Civil war in 1949 when the Chinese nationalists fled to the island of Taiwan when the communists took over power in Beijing. Since then, the two have been bitter rivals and their relationship was tense. China has claimed sovereignty over Taiwan which has been ruling itself with the support of the United States. Taiwan has been capitalist since then and rose to a wealthy high-tech country.

The political talks had been frozen since 1999 under the rule of a pro-independence party which lost the elections in spring. As Taiwan’s new president Ma Ying-jeou is convinced that better relations with mainland China and good economic ties are more important than formal independence, this is a chance for a more friendly future. Travelers between China and Taiwan have to change in Hongkong or Macau as almost no direct flights were permitted for more than 50 years. The resumed talks could lead to an opening of regular direct flights and Taiwan could allow up to 3,000 Chinese tourists to visit Taiwan each day. Until now, Taiwan has tightly controlled the number of Chinese visitors.

Despite China and Taiwan still being political foes, the business relations are extensive. About 300,000 Taiwanese live and work in mainland China, Taiwanese companies are investing in China and build up ever more factories. The bilateral trade has been rising for years.

However, China is unlikely to soften its aggressive claims of sovereignty over Taiwan which Beijing considers as a breakaway province. Another key issue is the Taiwan Strait where several military confrontations took place.

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International Aerospace Exhibition ILA 2008 in Berlin


The ILA 2008 air show opened on Tuesday in Berlin. It is among the largest and most important airshows in the world and is held biannually. It takes place on the southern section of Berlin’s Schoenefeld Airport which is will be the future Berlin Brandenburg International airport and replace the two other airports of the German capital. The focus of interest is on efficiency and alternative fuels. Several planemakers from around the world present their latest and most prestigious planes. The world’s largest passenger plane, the Airbus A380 was on the show on Tuesday as well several demonstrator planes which use alternative fuels.

Airbus presented a version of its A320 plane which uses fuel cells to power some of its steering systems. Boeing brought along a one-seater which uses fuel cells and batteries to fly. Another concept presented at the show is to run aircraft with fuel made from algae. The Dutch airline KLM announced that it will run a pilot project with an aircraft burning algae kerosene mixed with conventional fuel.

 This years exhibition reached new heights with 1,127 exhibitors from 37 countries and more than 300 aircraft on the show. Among the airplanes presented are numerous historic planes, military planes, cargo and passenger planes, helicopters and many more. On the occasion of the 60th anniversary of the Berlin Airlift, German chancellor Angela Merkel met an American airlift veteran.

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EADS, Airbus’ parent company, begging for more state support

Yes of course, competition is fierce, the process of designing new aircraft and producing them carries along lots of risks, but does this justify even further state support?

EADS’ CEO Louis Gallois complains that Boeing received 800 million dollars of subsidies from the U.S. government while Airbus received only $94 million from the European governments in 2006.

Well, it is an established bad habit amongst governments from around the world to support “their” aircraft manufacturer with extensive state subsidies. To some extent, this practice is justified as it takes a lot of effort and money to build up a new aircraft manufacturer.  Besides, the entrepreneurs would be overburdened with having to bear the entire risk in the beginning. Moreover, it would be unfair if one manufacturer would not receive state support and all competitors could rely on financial support by their governments. But the question arises whether state subsidies in this extent are still justified in the case of Boeing and Airbus which dominate the aircraft industry which anyway has full order books for years as a result of the aviation boom. Governments should consider whether they are planning to pay forever for their aircraft industry. If not, is there any better moment to cut subsidies than now? Furthermore, the U.S. and the EU could ultimately end their decades-old dispute over billions of subsidies to Airbus and Boeing. The companies would have to learn to stand on their own feet and less influence by the government would make it easier for the executives to make the processes efficient and economic. Anyway, I ask myself how Airbus can be efficient and competitive with producing the components of its planes all about Europe and then shipping them to Toulouse, France, for the final assembly. This structure of production is a waste of both, money and time and derives from the idea that Airbus is a European aircraft manufacturer with subsidiaries in all countries involved. The political influence at Airbus does by far more harm than good and hinders a real reorganization of the company.

Another issue is whether the taxpayers should spend billions of dollars to boost the profits of the companies or to reduce their debt if they screw up a major project.

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South American nations launch a union modelled on the EU

There are several political and economic communities which have united to benefit from a single market and from the power of the community. Amongst the most important are the North American trade bloc NAFTA and the European Union. On May 23, the twelve South American countries signed the Constitutive Treaty of the UNASUR, the Union of South American Nations. The UNASUR  is aimed at uniting two existing custom unions in South America, creating a single market, infrastructure and energy cooperation as well as an improved extraction of raw materials and coordinated economic and defence policies. Another major project is the planned introduction of a single currency in the long term. The UNASUR has a population of 388 million and the annual GDP is close to $2 trillion.

If Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela manage to unite and work together, they’re likely to become a strong global power, but there are fundamental differences and tensions between the member states. The economically powerful Chile supports the idea of free trade and low customs while other countries like Venezuela are making moves of protectionism and nationalization. Then there are considerable tensions between states like Columbia which has a good relationship with the United States and Venezuela which has in contrast quite a tense relationship with the US. Another issue is the crisis between Colombia, Ecuador and Venezuela after the Ecuadorian cross-border raid on Ecuadorian territory in March. On the economic side, there are steep differences in wealth and the economic situation across the countries. The divergent growth and inflation rates are a major hindrance towards a single currency. Most South American countries still trade in dollars with each other.

On the other hand, the UNASUR states don’t face the challenge of extreme linguistic diversity as the EU does. The two major languages across the continent are Spanish and Portuguese. The European Union has to spend more than €1,100 million on translating annually.

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EU climate dictatorship will fail and isn’t of any help either

European climate policy is all about regulating and defining standards. The European Commission is going mad when climate issues are concerned and eagerly tries to force all Europeans to buy the one and only European standard green(washed) car in the future. The Commission regulates each component of a car – be it the air conditioning, the engine, the tires, the braking system, the safety system or any kind of on-board device. Their next step will be to dictate how auto manufacturers have to design their advertisements.

All this nonsense prevents any form of competition of ideas and innovation in auto manufacturing. The EU hinders the function of the free market. Ever more expensive gasoline inevitably forces auto manufacturers to produce cars which consume as less gasoline as possible as most people can’t afford driving gas-guzzling cars anymore. Besides, auto manufacturers are now forced to make their cars conform to the EU regimentation rather than to focus on coming up with fresh ideas and concepts of more efficient cars which don’t reduce the pleasure of driving. If an automanufacturer fails to reduce its fleet consumption, severe punishments will follow. Countries which host producers of smaller cars like France and Italy could use this tool to distort competition by harming competitors which traditionally produce larger vehicles like most German manufacturers. It’s not surprising that small cars need less gasoline than larger ones, but this unfair practice does not encourage innovation or the improvement of efficiency in the sector of small cars which are often less efficient than larger ones. The EU should set targets for efficiency and encourage the auto manufacturers to find ways to meet these targets in an adequate timeframe. Hasty greenwashing won’t help the climate nor the people – as it is the case with the EU’s ambitious but stupid biofuel plans. All auto manufacturers should have to increase the efficiency of their cars without considering the total consumption or the total emissions.

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